Correlation Between Invesco CurrencyShares and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Invesco CurrencyShares and WisdomTree Emerging at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Invesco CurrencyShares and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco CurrencyShares British and WisdomTree Emerging Currency, you can compare the effects of market volatilities on Invesco CurrencyShares and WisdomTree Emerging and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Invesco CurrencyShares with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and WisdomTree Emerging.
Diversification Opportunities for Invesco CurrencyShares and WisdomTree Emerging
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares British and WisdomTree Emerging Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Invesco CurrencyShares is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Invesco CurrencyShares British are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Invesco CurrencyShares and WisdomTree Emerging
Considering the 90-day investment horizon Invesco CurrencyShares is expected to generate 1.2 times less return on investment than WisdomTree Emerging. In addition to that, Invesco CurrencyShares is 1.07 times more volatile than WisdomTree Emerging Currency. It trades about 0.01 of its total potential returns per unit of risk. WisdomTree Emerging Currency is currently generating about 0.02 per unit of volatility. If you would invest 1,793 in WisdomTree Emerging Currency on August 30, 2024 and sell it today you would earn a total of 13.00 from holding WisdomTree Emerging Currency or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco CurrencyShares British vs. WisdomTree Emerging Currency
Performance |
| Timeline |
| Invesco CurrencyShares |
| WisdomTree Emerging |
Invesco CurrencyShares and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco CurrencyShares and WisdomTree Emerging
The main advantage of trading using opposite Invesco CurrencyShares and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares position performs unexpectedly, WisdomTree Emerging can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WisdomTree Emerging will offset losses from the drop in WisdomTree Emerging's long position.The idea behind Invesco CurrencyShares British and WisdomTree Emerging Currency pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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